Wealthy families shift to direct AI deals, bypassing traditional VC funds
Family offices are increasingly investing directly in AI companies rather than through venture capital funds, according to advisor Djoann Fal. They are drawn by the potential for quick returns, with some deals promising 3x in three months. Family offices oversee trillions in assets, and alternative investments now make up 42% of their portfolios, per UBS.
The pattern echoes earlier cycles. Direct deals reached 13% of average family office portfolios in 2021, up from 9% in 2019, before collapsing as rates rose. PwC recorded 17,460 family office deals worth $1.05 trillion that year, followed by a 53% decline within 18 months. By early 2025, volume had hit a decade low.
Now activity is rebounding with larger checks on fewer transactions. Secondary markets appeal because buyers back companies with proven revenue rather than unproven startups. This lets family offices target specific AI leaders without committing to a diversified fund portfolio.
This concentration of private capital into a narrow set of AI companies could amplify valuation swings in the sector. If direct bets sour, wealthy families may retreat again, as they did after 2021, potentially starving promising startups of funding. Meanwhile, the trend may accelerate wealth concentration, as only the richest can access these exclusive deals, while traditional VC funds could face reduced inflows from their largest limited partners.